The Hindu Business Line : Banks in Kerala measure up to credit needs of the hour

THE face of the housing finance sector in India has undergone an unprecedented makeover in the past five years. The importance of the housing sector can be judged by the estimate that for every rupee invested in the construction of houses, Re 0.78 is added to the gross domestic product

India is the most advanced market in South Asia and the mortgage to GDP ratio is estimated at 2 per cent. This compares to a mortgage to GDP ratio of over 51 per cent in the US. Suffice to say, the penetration level of mortgages is miniscule when compared with the shortage of housing units.

Traditionally banks were rather reluctant to lend for housing, as they preferred financing working capital needs of industry. But the trigger of change came towards the end of the 1990s, against the backdrop of lower interest rates, industrial slowdown, sluggish credit off-take and ample liquidity.

Shift in focus: Commercial banks recognised that if they had to maintain their profit margins, they needed to shift their focus from the wholesale segment and build their retail portfolios. The lower interest rate regime, rising disposable incomes, stable property prices and fiscal incentives made housing finance attractive business. Added with this was the fact that housing finance has traditionally been characterised by low non-performing assets (NPAs) and given the vast demand for housing loans, almost all the major commercial banks plunged into the business of housing finance.

Doubts had been raised if the mortgage market could reach levels of saturation with the rise in the number of players. But this argument has been quickly put to rest in view of the vast demand for housing loans and continuing paucity of funds. The total number of houses that would be required cumulatively during the Tenth Plan period (2002-2007) is estimated at 22.44 million dwelling units.

The biggest winner of competition among rival players in the housing finance industry has been the customer. The industry today has been transformed into a `buyer's market' with service standards having to keep pace with the ever-rising customers' expectations.

Given the wide range of choice, the customer is armed with bargaining power and if not served to his/her satisfaction, the customer can effortlessly take his business elsewhere. Today, customer retention is the greatest challenge for the Indian housing finance industry.

And banks in Kerala have not lagged their counterparts elsewhere in doling out (retail) credit, where it is due! The bouquet of offerings covers financing options for a wide swathe of goods of high aspirational value such as cars and two-wheelers - and not just dwelling units.

CANARA BANK

Canara Bank provides a loan of up to Rs 1 crore for purchase or construction of a house or flat and up to Rs 7.5 lakh for repair, renovation or addition to buildings. The actual quantum would depend on the earning and repayment capacity of the person availing the loan. An individual can avail of loans amounts up to four years' gross salary or income. In select cases, this can go even up to five years' gross salary or income.

Floating and fixed rates of interest can be invoked, irrespective of amount, for loans repayable within 5 years at 7.50 per cent and 8 per cent; for those repayable for tenures over but within and inclusive of ten years, the rates are 8.25 per cent and 9 per cent; and for those over 10 years, 8.50 per cent and 9.25 per cent. Additionally, the bank offers insurance cover for life, property and accident death. It also provides a free Cancard, Visa or Master, with every home loan of Rs 2 lakh and above for the first year.

Canmobile: The branded vehicle loan, Canmobile, is available to individuals and reputed firms and companies. Up to 90 per cent of the invoice value will be advanced for purchase of new cars, 75 per cent of the value for used cars and either 80 per cent of the invoice value or 15 months' net salary for two wheelers. The applicable interest rate is 9.5 per cent for a period of 72 months in the case of cars and 48 months for two wheelers. The EMI payable for Rs 1 lakh works out Rs 1,824 for cars and Rs 2,509 for two wheelers. No processing charge is involved.

Educational: Canara Bank is also the official banker to the entrance examinations in the State. It offers provisional sanction of educational loan to all candidates appearing for counselling for admission to professional degree courses in all the three centres of the State this time round.

The Chairman and Managing Director, M. B. N. Rao, disbursed loans to over 500 students drawn from various educational institutions at a loan camp organised in Thiruvananthapuram only the other day. The bank had also made necessary arrangements for students to register their names on the spot to avail of the loan.

STATE BANK OF TRAVANCORE

State Bank of Travancore, headquartered in Thiruvananthapuram, also has rattled up a wide range of loan and deposit schemes to suit the varied needs of its customers. Following are some of the schemes.

Housing Loans: Loans up to a maximum of Rs 50 lakh are being offered with repayment periods extending up to 20 years. Interest is calculated on a daily diminishing balance, which is a very attractive option that has hit it off very well with the borrowers. Interest rates start from a low of 7.50 per cent per annum. There are no processing charges, nor are any hidden charges involved. Loans are available for construction of house, purchase of a built house and extension to an existing house.

The bank also has schemes that finance furnishing of the houses as well as for repairs and maintenance.

Car Loans: State Bank of Travancore extends finance for purchase of new as well as used cars. Interest rates start from an attractive 7.50 per cent per annum and, once again, the interest is calculated on a daily diminishing balance. The bank finances 85 per cent of the on-road cost of the vehicle, which will include the insurance and the lifetime tax.

The bank also operates a scheme to take over loans availed of from other financial institutions and also for reimbursing expenses incurred in the purchase of a new car. The bank has waived processing charges for the car loans.

Education Loans: The bank has devised an attractive educational loan portfolio through which it extends a helping hand to students to pursue their chosen study courses in schools/colleges. Loans of up to Rs 10 lakh are available for studies in India and up to Rs15 lakh for studies abroad. The repayment scheduled is timed to commence one year after the completion of the course or six months after the student gets a gainful employment, whichever is earlier. There is no processing charge for loans here either.

Suvidha Loan Scheme: The newly introduced SBT Nurses Suvidha Loan Scheme for nurses going abroad has proved to be an instant hit. It is the large number of opportunities for qualified nurses opening up in the European, United States and Middle East that prompted the bank to launch the scheme. Loans of up to a maximum of Rs 3 lakh is on offer for meeting the expenses involved, which will include those for registration, test and interview, agency commission, visa charges and air fare. The bank also has the Suvidha Mortgage Loan scheme - a general-purpose loan available up to a maximum of Rs10 lakh; Festival Loans up to a maximum of Rs 50,000; the Sahaaya Varsha Personal Loans, the thoughtful Prasanthi Loan product for pensioners and loans against various securities such as the NSCs.

Farm loans: The bank has set up specialised Agricultural Development Branches (ADB) totally dedicated to deal with agricultural advances. The bank has introduced the Kisan Credit Card Scheme for farmers enabling them to procure agricultural inputs and meet other productive needs.

The bank is now getting into marketing Life Insurance produces from SBI Life. It has also entered into a bancassurance arrangement with the United India Insurance Company. United India's non-life insurance products are now available to various segments of customers through the SBT branches.

The bank also has marketing tie-ups with Maruti Udyog, Hyundai Motors and Mahindra Tractors, apart from others, for finance to fund purchase a range of vehicles from these companies.

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Banks in Kerala measure up to credit needs of the hour